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2016 (9) TMI 869 - PUNJAB AND HARYANA HIGH COURT

2016 (9) TMI 869 - PUNJAB AND HARYANA HIGH COURT - TMI - Levy of surcharge on amount of tax paid - works contract - Haryana Value Added Tax Act, 2003 - Whether on the facts and in the circumstances of the case, the Ld. Tribunal was justified in upholding the levy of additional tax as surcharge leviable on the taxable turnover even in the case of works contractor who has opted for lump sum tax? - Held that: - the decision in the case Govind Saran Ganga Saran v. Commissioner of Sales Tax and other .....

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levy. As provided for in Rule 52 of the Rules, in the case of retailers, taxable turnover is determined only then the amount of tax is calculated. Whereas in none of the other categories of the dealers opting for payment of tax on lumpsum basis, the taxable turnover is calculated. - One of the important component on taxation being missing namely taxable turnover in the case of dealers opting for payment of tax on lump sum basis, levy of additional tax under Section 7A of the VAT Act cannot .....

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peal before this Court impugning the order passed by the Haryana Tax Tribunal (for short 'the Tribunal'), upholding levy of surcharge on the amount of lump sum tax paid by the appellant on the works contract. The appellant in the present case is a dealer registered under the Haryana Value Added Tax Act, 2003 (for short 'the VAT Act') and is carrying on business as works contractor. Facts in CWP No. 8436 of 2014: 3. The assessee has filed the present petition impugning the order o .....

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case of M/s Mahashiv Promoters (P) Limited, Rohtak Vs. State of Haryana, (this order of the Tribunal is subject matter of challenge in VATAP No. 59 of 2014) specifying that the surcharge is leviable and be collected from the lump-sum composition dealers availing benefit of lump sum payment of tax except the retailers. 5. As the legal issue involved in all the cases is identical, the detailed facts are being taken from VATAP No. 59 of 2014. 6. The assessee has filed the present appeal against th .....

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of interest? Arguments of Appellant 7. Learned counsel for the appellant submitted that the appellant is working as a works contractor duly registered under the provisions of the VAT Act. For the assessment year 2010-11, the appellant filed its quarterly return on statutory Form VAT-R6, as the appellant had opted for payment of lump-sum tax. The case of the appellant was taken up in scrutiny and vide order dated 13.9.2012, the assessment was framed calculating the amount of tax payable on the gr .....

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he substantial questions of law as have been referred to above. 8. Learned counsel for the appellant argued that Section 3 of the VAT Act which is the charging section provides for incidence of tax. The tax is to be calculated on the taxable turnover determined in terms of the provisions of Section 6 of the VAT Act at the rates of tax provided for in Section 7 of the VAT Act. Section 9 of the VAT Act provides for payment of lump sum in lieu of tax payable under the Act by way of composition. Sec .....

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es applicable for different types of dealers who can opt for payment of lump-sum tax. 9. Elaborating the arguments, learned counsel for the appellant contended that Section 9 of the VAT Act, which provides for payment of tax in lump-sum clearly mentions that such amount is payable 'in lieu of tax payable under the Act'. This will include all types of taxes payable under the Act. Even Section 7A of the VAT Act under which additional tax has been levied is also a tax. Hence, there cannot b .....

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ery dealer, ply-board manufacturer etc., the same is payable in terms of capacity. The mere fact that there is exclusion of retailers, one of the category in which case lump-sum payment of tax is permissible, shows that the intent of the levy is in those cases where taxable turnover can be determined. In support of the plea reliance was placed upon Bhima Jewellery Vs. Assistant Commissioner (Assessment), Kerala and another, (2014) 71 VST 110 (SC); State of Uttar Pradesh and others Versus Systema .....

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which is a kind of tax. Arguments of State 11. On the other hand, learned counsel for the State submitted that a plain reading of Section 7A of the VAT Act shows that the tax, which is in the form of additional tax or surcharge, is to be calculated on the tax payable under the VAT Act. It has not been levied or to be calculated on the taxable turnover, as is sought to be argued by counsel for the appellant. She further argued that the provision starts with a non-obstante clause, meaning thereby .....

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the VAT Act is over and above. 12. The judgment of Hon'ble the Supreme Court in Bhima Jewellery's case (supra) was distinguished referring to the provisions under consideration there. In that case, additional tax was leviable with reference to tax, which was payable under specific sections. It did not include the section under which lump-sum tax was payable. She referred to a Division Bench judgment of this Court in Hoshiarpur Large and Medium Industries Association and others Versus St .....

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, Meerut-II, 2006(198) ELT 3, was cited dealing with the non-obstante clause. Reference was made to assessment order passed in the case of the appellant, wherein taxable turnover had been determined. Reply by Appellant 13. In response, learned counsel for the appellant submitted that all the words used in Section 7A of the VAT Act have to be given their true meaning. Words ''levied and collected on the taxable turnover'' cannot be held to be surplus. The judgment of this Court in .....

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cular was issued by the Excise and Taxation Commissioner on 14.1.2014 only after the order was passed by the Tribunal on 8.10.2013, which is subject matter of appeal before this Court. 14. Heard learned counsel for the parties and perused the paper book. Discussions 15. As per the scheme of the VAT Act, Section 3 is a charging section, which provides for levy of tax on sale of goods within the State. The tax is to be calculated on the taxable turnover. The taxable turnover is to be determined in .....

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tailer in lump-sum composition with the department, an additional tax, in the nature of surcharge, which shall be calculated at the rate of five percent of the tax, payable by him: Provided that the aggregate of tax and the surcharge payable under this Act, shall not exceed in respect of the goods, declared to be of special importance in inter-State trade or commerce under Section 14 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), the rate fixed under Section 15 of that Act. 2. Exce .....

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mposition, a lump sum linked with production capacity or some other suitable measure of extent of business, or calculated at a flat rate of gross receipts of business or gross turnover of purchase or of sale or similar other measure, with or without any deduction therefrom, to be determined by the State Government, and such lump sum shall be paid at such intervals and in such manner, as may be prescribed, and the State Government may, for the purpose of this Act in respect of such class of deale .....

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s in force may, subject to such restrictions and conditions, as may be prescribed, opt out of such composition by making an application containing the prescribed particulars in the prescribed manner to the assessing authority, and in case the application is in order, such composition shall cease to have effect on the expiry of such period after making the application as may be prescribed.'' 17. Rule 46 of the Rules provides for general provisions in respect of lump-sum dealers. Rules 47 .....

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:- Sr. No. Capacity of Kiln Category Lump sum tax payable in lieu of tax for the period 1-10-2005 to (30-9-2009) 1 2 3 4 Sr. No. Capacity of Kiln Category Lump sum tax payable in lieu of tax for the period 1-10-2005 to (30-9-2009) 1 Brick kiln of capacity of more than 33 number of Ghori +A ₹ 2,68,800/- plus ₹ 9,360/- per additional ghori above 33 ghories 2 Brick-kiln of capacity of 28 to 33 number of Ghori A Rs.2,68,800/- 3 Brick kiln of capacity of 22 to 27 number of Ghori B ₹ .....

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declaration(s) in Central Form C, which he shall disclose use of, at the time of applying for issue of declaration forms and in an annual return to be furnished in Form VAT-R8 within a month of the close of the year. He shall not be required to make use of declaration in Form VAT-D3 for carrying goods. xx xx xx xx 48. Lump sum scheme in respect of lottery dealers. (1) Every dealer engaged in the business of purchase or sale of lottery tickets of face value of less than seven rupees per ticket (h .....

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of reduction/omission of lump sum rates paid at the rates applicable before such reduction/omission. xx xx xx xx (6) A lottery dealer liable to pay lump sum may purchase lottery tickets for sale on the authority of declaration(s) in Central Form C, which he shall disclose use of at the time of applying for issue of forms and in quarterly returns to be filed in Form VAT-R9 within a month of the close of the quarter. 49. Lump sum scheme in respect of contractors (1) A contractor liable to pay tax .....

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ning the following particulars:- (1) Name of the applicant contractor; (2) TIN; (Append application for registration, if not registered or not applied for registration); (3) Name of the contractee; (4) Date of award of the contract; (5) Place of execution of the contract; (6) Total cost of the contract; (7) Period of execution, and appending therewith a copy of the contract or such part thereof as relates to total cost and payments. (2) The application shall be signed by a person authorised to m .....

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after deducting therefrom the amount paid by the contractee on behalf of the contractor under section 24 for that quarter. The treasury receipt in proof of payment made and certificate(s) of tax deduction and payment obtained from the contractee shall be furnished with the quarterly return. (4) The lump sum contractor shall file returns at quarterly intervals in Form VAT-R6 within a month of the close of the quarter and shall pay lump sum, if any, due from him according to such return after adj .....

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per press per annum 1 8' x 4' x 10 ₹ 9.00 lakh 2 8' x 4' x 7 ₹ 6.30 lakh 3 6' x 4' x 10 ₹ 6.75 lakh 4 6' x 4' x7 ₹ 4.73 lakh 5 4' x 4' x 10 Rs.3.21 lakh 6 4' x 4' x 7 ₹ 2.25 lakh Where an 8'x 4' x 10 press is designed to make 10 number ply-boards each measuring 8 feet by 4 feet i.e. 320 square feet ply-board in single operation and presses of other sizes are designed to make ply-board in the same proportion: PR .....

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x (7) A ply-board manufacturer liable to pay lump sum may make use of declarations in Form VATD1 or in Central Form C for making purchase of goods at lower rate of tax or Central Sales Tax, as the case may be, for use in manufacturing of goods for sale. He shall not be required to make use of declaration(s) in Form VAT-D3 for carrying goods. He shall be required to furnish quarterly returns in Form VAT-R11 within a month of the close of the quarter. xx xx xx xx 52. Lumpsum scheme in respect of r .....

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plication in Form B given below simultaneously: PROVIDED that a retailer who deals in aerated water/drinks or medicines shall not be eligible to opt for payment of lump sum. xx xx xx xx (4) The retailer whose application has been allowed (hereinafter referred to as the 'lump sum retailer') under the foregoing sub-rule shall furnish returns in Form VAT-R7 and shall pay lump sum at quarterly intervals within one month of the close of the quarter. The lump sum for a quarter shall be compute .....

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f his application having been allowed, pay a lump sum on the value of goods, not purchased in the State on payment of tax whether under the Act or the Act of 1973 or received or brought from outside the State, held in stock by him on the date of application, calculated at the rate of tax applicable on sale of such goods in the State: PROVIDED FURTHER that purchase value of goods for the purpose of computing lump sum shall be the invoiced price including all taxes and charges shown in the invoice .....

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ccept from a class of dealers, in lieu of tax payable under the VAT Act, for any period, by way of composition, a lump-sum tax. It can be linked with production capacity or can be determined on the basis of other suitable measures related to the extent of business or calculated at a flat rate of gross receipt of business or gross turnover of purchase or sale etc. The tax so determined has to be paid at such intervals as may be specified. The State is further entitled to provide for other conditi .....

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red to file his annual return on Form VAT-R8. There are other restrictions also. Similarly Rule 48 of the Rules, prescribes for payment of lump sum tax in respect of lottery dealers. The rates have been prescribed with reference to types of lotteries such as, weekly, monthly, festival or instant lottery and the rates prescribed are per draw. In this case return is to be filed on statutory form VAT-R9. 20. Rule 49 of the Rules deals with lump sum payment of tax by the contractors. The tax is to b .....

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21. Rule 52 of the Rules, which provides for payment of lump sum tax by the retailers, is little bit different as compared to other category of dealers, who can opt for payment of lump sum tax. Option for payment of lump sum tax can be exercised only by a dealer, whose aggregate of purchases of taxable goods made and the value of goods received for sale by him during the last year did not exceed ₹ 40 lacs. The retailer dealing in aerated water/drinks or medicines are not eligible to opt fo .....

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in the State. This provision though provides for payment of lump sum tax, but the calculation thereof is at the rates of tax provided on the taxable turnover. Even for the sale of goods from the purchase of goods from outside the State when sold within the State, the tax is leviable at the rates provided under the VAT Act. Meaning thereby, the taxable turnover will have to be determined. 22. Section 7A of the VAT Act if analyzed starts with a nonobstante clause. It provides for -levy and collect .....

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ssue regarding various components in the concept of taxation was considered by Hon'ble the Supreme Court in Govind Saran Ganga Saran v. Commissioner of Sales Tax and others, (1985) 60 STC 1 (SC). It was opined that four components are: (i) taxable event; (ii) taxable person; (iii) rate of tax and (iv) measure or value for which rate of tax is to be applied. In the absence of any of the components, the levy may be struck down. The relevant paragraph thereof is extracted below: 6. The componen .....

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rtainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness ill the legislative scheme defining any of those components of the levy will be fatal to its validity. 25. The same view was expressed by Hon'ble the Supreme Court in 2015(1) SCC 1, Commissioner of Income Tax Versus Vatika Township Private Ltd. 26. On interpretation of a statute, Hon'ble the Supreme Court in Mathuram Agrawal v. State of M. P., (1999) 8 SCC 667 opined that it is only the p .....

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tation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation .....

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he section. Such as: (i) taxable event - the taxable turnover. (ii) taxable person - the dealer registered under the Act. (iii) rate of tax - @ 5% (iv) measure of tax - on the tax payable under the Act. 29. As has already been noticed above, levy of tax under Section 7A of the VAT Act is on the taxable turnover. At the time of prescribing the rates instead of mentioning different rates of taxes for different commodities, it has been provided that its calculation shall be at the rate of 5% of the .....

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Rules, in the case of retailers, taxable turnover is determined only then the amount of tax is calculated. Whereas in none of the other categories of the dealers opting for payment of tax on lumpsum basis, the taxable turnover is calculated. Unless in the case of a dealer taxable turnover is determined, the provision will not have application. As has already been noticed above in the case of Brick kiln owners, the amount of lump sum tax is related with the capacity of brick kiln. In the case of .....

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eing missing namely taxable turnover in the case of dealers opting for payment of tax on lump sum basis, levy of additional tax thereon cannot be sustained. 31. In South India Corporation Ltd's case (supra), the issue under consideration before the Division Bench of Madras High Court was regarding levy of additional tax in terms of a separate Act enacted for the purpose, titled as Tamil Nadu Additional Sales Tax Act (for short 'the 1970 Act'), the existing Act being the Tamil Nadu Ge .....

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le turnover, but is determined with reference to the total value of works contract, in respect of which option was exercised. In the absence of determination of taxable turnover, additional sale tax was held to be not leviable. Claim for additional sales tax by treating contract value as taxable turnover was held to be not permissible. Relevant paras of the judgment are extracted below: 15. As the additional tax is thus levied at the prescribed percentage on the taxable turnover of the dealer th .....

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r is determinable under the principal Act. 16. While there is no difficulty in determining the taxable turnover of a dealer who is engaged in the execution of a works contract in cases where the tax is computed in terms of section 3-B of the Act, the determination of turnover of a dealer who has opted for payment of tax under section 7-C is not possible at all under the parent Act, as the amount computed under section 7-C is not an amount which is determined as tax on the taxable turnover, but i .....

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x Act. The consent given by the dealer under section 7-C for the levy of percentage of total contract value towards the tax otherwise payable under section 3-B cannot be stretched to include the payment of additional sales tax under any other enactment by treating the contract value as taxable turnover for the payment of tax under the Additional Sales Tax Act. 32. Amendment was carried out in Section 7C of the 1959 Act providing for payment of lump-sum tax by the works contractors defining the t .....

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ferred to in item (vi) of clause (g) of section 2, may, at his option, instead of paying tax in accordance with section 3B, pay, either on the total value of each works contract or on the total value of all works contract, executed by him in a year, tax calculated at the following rate, namely: (i) Civil works contract ... Two percent of the total contract value of the civil works executed. (ii) All other works contracts... Four per cent of the total contract value of works executed.'' A .....

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5 and 5-A of the Kerala General Sales Tax Act, 1963, whereas compounded rates were prescribed under Section 7 thereof. Additional tax was levied under Section 5D of that Act therein only on the taxes payable under Section 5 and 5A of that Act. Hence, levy of additional tax on the compounded rates was held to be bad. 34. In Systematic Conscom Ltd 's Case (supra), the facts were that the provision providing for composition of tax liability, further provided that in case there is any change in .....

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judgment of this court in Hoshiarpur Large and Medium Industries Association's case (supra), is not applicable in the case in hand as the issue involved therein was regarding vires of Section 30-AA added in Punjab General Sales Tax Act, 1948 providing for levy of surcharge even on the dealers availing exemption from payment of tax. Surcharge otherwise was leviable under Section 5(1)(C ) of 1948 Act. Vires thereof was upheld. The contention raised by learned counsel for the petitioner therei .....

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